Mirroring the maquila boom
New Mexico looks to build its border industry by attracting suppliers for Mexican manufacturers across the border in Juárez
On this stretch of county road in southern New Mexico, dunes edge out onto the pavement, and two men in cowboy hats move slowly around a small herd of Holstein cattle. A double-long trailer backs up against a chain-link fence topped with loops of razor wire, where a sign announces that this border crossing is for livestock only; pedestrians must head to the Santa Teresa Port of Entry, at the end of the Pete V. Domenici International Highway.
On that main road, leading north from the border, there are even fewer signs of life. The Domenici Highway runs 12 miles from New Mexico’s newest border crossing to Interstate 10. Although it offers two wide lanes in either direction, the highway’s mid-week traffic is nonetheless light: A minivan with Texas plates roars north, a black-and-yellow truck with Chihuahua plates idles on the side of the road.
Overlooking the city of El Paso to the east, Santa Teresa has a rail line, the Doña Ana County Airport, 2 million square feet of industrial space, an estimated 3,500 residents and not much else. Dunes and desert scrub now dominate this no-man’s-land where Mexico, Texas and New Mexico converge, but many say it soon will bloom — with modern development. “It looks like it’s just about to take off,” says David Majors, vice president for marketing at El Paso-based Verde Corporate Realty Services. “We’re pushing on all fronts to develop it responsibly in a very planned manner.” And the plans aren’t small: Verde hopes to build some 4,000 homes within the next 10 years and foresees an ultimate future of 100,000 residents.
“We think, if there’s going to be an industrial area, it’s going to be the Mexican border, and we’re focused on development on both sides of the U.S./Mexico border,” he says. “It all fits together; residential development is the catalyst that’s going to help all of it grow.”
Forty years ago, in an effort to boost employment in the northern part of the country, the Mexican government began its maquiladora program, which allows manufacturing plants access to goods that move duty-free across the U.S./Mexico border. Today, there are more than 2,800 maquilas — most of which assemble manufactured goods, from electronics to appliances and beyond — supporting 1.2 million jobs. Historically, manufacturing hasn’t been a strong component of New Mexico’s economy, which was dominated for decades by government employment and natural resource extraction. But in the past few years, the state has hustled to recruit manufacturers that would serve the maquiladora industry in Juárez via what the state’s Economic Development Department calls the “maquila supplier program.”
“We have never fully taken advantage of the Mexican market,” says Jerry Pacheco, former director of the state’s Mexican Affairs and Trade Division and current executive director of the Santa Teresa-based International Business Accelerator, a trade counseling center funded through the state. “The population of the city of Juárez is almost the size of the entire state of New Mexico, and it’s right across the border.”
Pacheco points out that maquiladoras in Mexico import about $88 billion in goods from U.S. companies each year, and there are 300 maquiladoras in Juárez alone. “If we could get even 10 percent of that business,” he says, “we could create jobs in New Mexico and industrialize a very poor area.”
Already, the state has jumped at the chance to supply appliance manufacturer AB Electrolux, which recently shut down its Frigidaire plant in Greenville, Mich., and moved it to Juárez. By convincing three Electrolux suppliers — Stanco Metal Products, Pennant Molding and Grand Haven Technical Sales — to relocate, New Mexico has gained some 130 jobs (though, if the license plates in the parking lot are any indication, almost all the new employees commute from Texas).
Companies relocating to southern New Mexico get a good deal for any number of reasons: Corporate franchise fees are low, as are property taxes. The state offers a variety of incentives, including grants, loans, bonding authority and tax exemptions. Land is cheap, and so is labor: According to the Mesilla Valley Economic Development Alliance, the umbrella marketing organization for Doña Ana County, manufacturing wages are 48 percent lower here than the national average. And if it’s true that wages are even lower in Mexico, where workers earn an average of $3 an hour, New Mexico’s economic development officials point out that American workers are more highly skilled and electricity supplies are typically more reliable in the U.S. than across the border.
Even as Mexico has bled manufacturing jobs to countries with lower labor costs — China, most notably — it has been able to retain certain industries, among them large-appliance assembly. Refrigerators, for example, are too expensive to ship from China to the United States, says Steve Vierck, president and CEO of the Mesilla Valley Economic Development Alliance. Transportation costs have also helped New Mexico recruit suppliers for appliance maquiladoras.
“Companies really can’t continue to be located in say, Grand Rapids, Mich., and take three days shipping parts to Juárez,” Vierck says.
Last October, New Mexico Gov. Bill Richardson, D, and the president and CEO of Union Pacific Corp., Jim Young, announced that the company was moving its rail yard from downtown El Paso to Strauss, N.M., a ghost town four miles up the line from Santa Teresa. Sometime before 2015, the company will also build an “intermodal” ramp to allow some 100,000 annual transfers between rail and truck.
If big announcements like the UP move draw attention — the facility will cover more than 900 acres, cost $150 million to build and support an estimated 285 jobs — county and local officials are still trying to figure out who is responsible for Santa Teresa’s more prosaic infrastructure needs. Development in Santa Teresa has been uncertain in the past, Doña Ana County Commissioner Dolores Saldaña-Caviness says, in part because of a fight between the neighboring town of Sunland Park and the county itself over who will provide services. “God willing,” Caviness says, an agreement between the two entities will be signed this summer, giving zoning and planning authority to Sunland Park and water and wastewater responsibilities to the county. Santa Teresa is a thriving community, she says, but “hopefully, it’ll be a town that’s sustaining itself within the next five to 10 years.”
A few hundred feet from the Santa Teresa border crossing, flanked by dunes and last season’s yucca stalks, rise three new buildings, one of which hosts the Bi-National Sustainability Laboratory. Executive director Paul Maxwell’s office sits at the entrance to the 150,000-square-foot industrial building, a portion of which Verde Realty has given over to the lab, rent-free, for two years. A joint project of the U.S. and Mexican governments, the lab is something of a business incubator, helping companies find the financing or business expertise they lack. But it focuses specifically on companies looking to develop the entire border region, not just trying to work one side or the other.
The idea for the lab came out of Sandia National Laboratories in Albuquerque, Maxwell says: By using technology to create more economic opportunities, the thought was, economic disparity across the border would be reduced, and both countries could be more secure.
Despite the relative lack of lunch spots — you can drive 10 minutes to the country club or cross into San Jeronimo, Mexico, looking for a side-of-the-road dive — Santa Teresa is an ideal home for the lab, Maxwell says. It’s central to the region it serves, which runs from Brownsville, Texas, to San Diego, Calif., and the border near Santa Teresa is ripe for business. The federal government spends some $8 billion a year along the Interstate 25 corridor between the Santa Fe/Los Alamos area and El Paso, says Maxwell, and it’s pouring money into weapons laboratories, military bases, universities and research institutions. “Just think of what we could create by using some of that technology,” he says. “This desert could grow a lot of great companies, if we were imaginative enough, creative enough.”
Achieving that promise will require a change in thinking, he says. “It’s hard to put your finger on exactly why the border is poor,” says Robert W. Gilmer, vice president in charge of the Federal Reserve Bank of Dallas, El Paso Branch. One big problem has to do with the “best and brightest” people leaving the region because they can’t find work, he says. “They leave and take those skills and talents with them,” Gilmer says, “because the border has never been able to use those very effectively.”
For the border to stop being perceived as poor and crime-ridden, it will have to be seen as a coherent economic region, rather than as a line dividing two countries and their individual resources. “When people think about the border, they think drugs, thugs and illegals,” Maxwell says. But it doesn’t have to be that way. “If you have wealth-generating opportunities in Mexico, no, not everyone is going to find jobs,” he adds. “But at the very least, you’re going to mitigate people seeking those life-supporting jobs in the U.S.”
As growth continues in Doña Ana County and Las Cruces increases its dependence on El Paso, the two regions will merge into one metropolitan area, Gilmer says. “I understand we cross lines and authorities change, but as an economist, that doesn’t mean a lot to me,” he says. “El Paso becomes the dominant force in New Mexico as you go forward, and as far as our force in the region, El Paso and Juárez are going to be the epicenter for a long time.”
Economic integration at the border will be at the center of economic change, he says, and it’s only just beginning. “What has impressed me is the tremendous flexibility and adaptability of the border region,” he says. “Every time the rules change, the amorphous mass goes around the changes and makes things work — despite the worst predictions. There is a willingness because of its poverty to circumvent the rules.”
Anyone who has crossed from El Paso into Juárez is familiar with the cadence and congestion of the border. It feels not so much like travel between two countries as an immersion in someplace altogether different. Ladies in heels and polyester shirts move through with colorful shopping bags; 18-wheelers idle while officials run through paperwork. Beggars, kids and con men call out to anyone passing by. There’s the smell of food, cigarette smoke, car exhaust. Seemingly endless numbers and kinds of people are setting about their seemingly endless numbers and kinds of business, and crossing the border is just part of daily life.
In Santa Teresa, just 20 miles away, there is none of that energy, unless you count an occasional idling truck. It’s eerily quiet, whether you’re driving or walking the paved streets and empty cul de sacs near the border. Behind the buildings housing the recently relocated manufacturers and the Bi-National Sustainability Laboratory stands an empty cattle corral. It’s hard to say the last time it was used — there’s no sign of cows. But a hose runs to a water tank, and five hay bales slump in a fallen pile. It’s just not the same border here. At least, not yet.
The author writes from Albuquerque, New Mexico, but has been inexplicably enamored of El Paso, Texas, since she was a kid.
This story was funded by a grant from the McCune Charitable Foundation.